SunPower Soaring on Huge PG&E Solar Deal

Wow, PG&E’s massive 800 MW solar deal isn’t just good for Cali’s carbon emissions, the solar industry and the planet — its good for SunPower’s stock, too. This morning, SunPower’s shares are trading up almost 19 percent on news of the deal.

PG&E’s solar power contracts suggest that solar photovoltaics are finally becoming a viable utility-scale option, and the cost of solar PV is creeping that much closer to grid parity (the cost of fossil fuel power electricity). American Technology research analyst John Hardy notes that the deal has “monumental implications” for SunPower; it’s equivalent to about 70 percent of the total installations the company has done to date, he says.

Hardy estimates that SunPower is selling the 250 MW system for around $6 per watt — that’s still relatively high compared to $1 per watt grid parity. But assuming SunPower is providing all of the modules, that could deliver SunPower $1.5 billion in revenues and around 33 percent blended gross margins. No wonder the street is shining on SunPower.

The project is contingent on renewal of the investment tax credit, so for the solar industry in general, the deal could act as a valuable pressure point to extend the 30 percent tax credit. PG&E now has more of an incentive to help get the credit renewed, and the stakes just got a lot bigger — financially and in terms of public perception. If the tax incentives fail it will be a public disaster, with an evaporation of so much funding and potential clean power.

And for all you number crunchers, Hardy offers these handy points of reference on the scale of PG&E’s solar PV plans:

800 MW is about 30 percent of the total worldwide installations in 2007.

800 MW is 3.6 times the total amount of PV installed in the U.S. in 2007.

800 MW is about 80 percent of the installations expected to be completed in Spain in 2008, which has been the cause of much multiple compression.